Oil is selling for less than $10 across key North American hubs

https://www.eia.gov/todayinenergy/detail.php?id=9991

Why oil price is crashing is simply variance in the greater scheme of things. Not some death knell to it, not in 2020. Industry will take far far longer to convert to electrical/alternative methods of energy.

Though I'll concede that oilsands/hydraulic fracking dealt a serious blow to oil prices worldwide.

Maybe some are, but world coal consumption is actually increasing. Imho the bigger effect here is developed countries externalizing pollution and manufacturing costs (electric cars take a lot more energy to make) to countries that don't mind burning whatever they can find. China has enormous reserves of brown coal - they'll happily burn it to make our solar panels and wind turbines.

http://theconversation.com/explaining-the-increase-in-coal-c...

Oil tankers that are converted to FPSOs and FSOs are among the most expensive storage available for crude.

On a consumer level, it would just delay the inevitable price decline of oil, heating fuel, diesel, gasoline, resid, and jet fuel, and that delay would be harmful to alternative energy investment and electric car sales. Not to mention it would benefit China, a place where industrial activity has already been rebooted.

The economy isn't down because oil prices are down. It's quite the opposite; the oil market is reflecting the economic reality. Prices were declining even prior to the OPEC+ meeting. If it were not for the market already softening, nobody would have been discussing additional production curbs at all. We had a mild winter, so heating fuel demand was low. Industrial production was interrupted, so that hurt demand for residual fuels that give energy to factories and power generation plants, as well as the ships that carry goods across oceans. Diesel was affected for the same reason. Jet fuel demand is down due to the complete standstill of the travel industry. Even bitumen and carbon black should see decreased demand because when people stop commuting and traveling, there is less need to resurface roads and replace tires. Plus, if you're not driving your car, you're not buying much gasoline.

Those are massive, natural reasons why demand is down for gasoline, middle distillates, and heavy residues. You can't bring that demand back by simply pumping a few-hundred-million barrels of oil into the ground for storage.

The way to induce a manufactured shortage would be by imposing import restrictions or tariffs.

In my mind a bailout is cash in exchange for nothing. If you're paying someone for the usage of something they own, isn't that just commerce?

It's not even clear that the US one is useful for war anymore. At the time it was built, the US was a net importer of about 5 million barrels/day of oil, so it made sense to have a buffer allowing the country to weather a few months of an embargo. But now the US is a net exporter. The strategic petroleum reserve can handle withdrawal of about 4 million barrels/day, compared to about 11 million barrels/day of regular US production, which is more than enough for total domestic demand. And the regular production is more geographically distributed and redundant. If anything, just leaving the oil in the ground in its original locations is a better strategic reserve nowadays, compared to pumping it out of one part of the US, only to pump it back into the ground in a different part of the US, into a facility that forms more of a single point of failure, and doesn't even have a faster withdrawal rate. That's just shuffling oil around between different holes in the ground as a kind of make-work job.

Companies can't actually produce oil for $5/bbl. In the long term that price would drive some of the producers out of the market and then the price would increase. It might go lower than it is right now before it goes back up, but it won't stay at $5/bbl in the long-term. They might give up the chance to pay $5/bbl instead, but it's unlikely they'd be losing money on the deal. Assuming they actually resell the oil when the price rebounds.

> This could be a massive moment for renewable energy; goods transportation costs are very low and many people will be seeking work once the pandemic abates, so the government could establish WPA-style programs to build wind farms, electrical grid improvements, and solar farms -- instead of spending that money on buying fossil fuels in order to pump them back into the ground. Instead of spending money in an attempt to cling to fossil fuels, we could use this moment as an opportunity to pivot.

WPA-style programs were never really efficient. They came out of the Keynesian argument that it's better to pay someone to dig holes and fill them back in than have them unemployed, because they're still not doing anything useful but at least then they have money to spend in the economy, and if you can get them to work doing anything even marginally useful then even better.

The biggest problem with it is that you're better off to just give them the money unconditionally (so they have it to spend) and then let them find a normal job with a normal level of productivity while still receiving the extra money, because there would be plenty of normal jobs now that everyone has some money to spend again and normal jobs are more productive than makework.

But that brings us back to the low oil prices. If you're going to stimulate employment by handing out cash, where does it come from? A carbon tax is a damn fine source, but even better when you have low oil prices, because then consumers don't feel it as much. And then you get your green jobs, automatically, because the carbon tax keeps oil and coal more expensive than electric cars and solar panels, and then there's a lot of demand for building electric cars and solar panels from all the people with money to spend because they're receiving the dividend from the carbon tax.

> The sooner the price of oil bottoms and a few overextended frackers devalue themselves by selling at a loss in order to generate cash flow, the more likely it is that Saudi Arabia will be satisfied with the results of its price war and will return to the negotiating table to re-establish output curbs.

I don't know about that. I think everybody sees the writing on the wall here -- we can't burn the known reserves we have in the ground or the world is totally screwed, so somebody is going to end up sitting on a whole lot of oil and coal that doesn't get sold before the world switches away from it. Nobody wants to be the ones holding the bag so everybody is now trying to sell their reserves for whatever they can get before one solution or another shuts down the demand permanently. That's not likely to change even if some of the producers go bust.

What gets price back up (some, maybe never fully to where they were) isn't the Saudis cutting production after the frackers go bust, it's just the frackers going bust. Which they'd still do even if we topped up the reserves, because that by itself wouldn't get the price up to where they'd need it to stay in business.

The real question is, if we top up the reserves, what are we supposed to do with them then? Do we want to be the ones holding the bag?

refined oil has a TTL or expiration date.

Generally, I've found that prices go up about $0.10/gal for each state you get away from the gulf coast (at least in the eastern US). Sometimes there's a few days delay to consider, too.

Is the fed going to monetize their debt as well?

Of course you'll go out of business after a while below that floor so this situation wouldn't be sustainable, but it's consistent with economics that it could happen. (edit: I guess saudi arabia et al. are pretty much in this position now)

https://www.cmegroup.com/trading/energy/refined-products/rbo...

Of course the realities of the supply chain won't allow 50 cents a gallon fuel in the US, but it's interesting that April contracts (RBJ20) settled around this $0.55 mark - deliveries will shortly be happening at these ridiculous prices.

In my mind you just turn the pump off that's sucking the oil out of the hole.